Optimizing Retirement Income by Integrating Retirement Plans, IRAs, and Home Equity: A Framework for Evaluating Retirement Income Decisions

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It will be critical for many older middle-income American workers to effectively deploy all their retirement resources that have significant value, including accounts in defined contribution retirement plans, IRAs, and home equity. For example, at the end of 2016, the total amount of savings that resided in IRAs was $7.9 trillion while the amount held in employer-sponsored DC retirement plans was $7 trillion. Also, for many households, the value of home equity exceeds the amount of retirement savings held inside or outside employer-sponsored DC retirement plans.

In collaboration with the Society of Actuaries, the Center presents a framework of analyses and methods that financial advisers, financial institutions, plan sponsors, and retirees can use to compare and assess strategies for developing lifetime retirement income. The report presents a portfolio approach for retirement income strategies that integrates Social Security claiming decisions, investing and deploying retirement savings, and utilizing home equity if necessary. The report identifies one straightforward strategy that can be reasonably implemented in virtually any IRA or 401(k) plan, called the SS/RMD Spend Safely in Retirement Strategy.

The report shows how financial advisers, financial institutions, and employers can use the analyses in the report to help older workers make important life decisions. These decisions include how long they should continue to work full time, whether they should transition into retirement with part-time work, when they can fully retire, and how much money they can spend in retirement.